Natural Gas Down 4% on Weather: Try Stocks Instead

By Brendan Conway

Natural gas may have a bright future in the U.S., but it’s not exactly easy to hitch a ride. Not with the commodity futures markets and funds built to reflect them.

Gas is staying true to its hyper-volatile reputation Monday by falling nearly four percent, apparently because the weather’s a bit warmer, to $3.33. The United States Natural Gas Fund (UNG) is down 4% at $18.75. From Nicole Hong of Dow Jones Newswires:

Private forecaster Commodity Weather Group predicts higher-than-normal temperatures in the Midwest and Northeast, both regions are heavy users of natural gas to heat homes Warmer temperatures translate in to less demand for the fuel.

In addition, CWG meteorologist Jason Setree said that after a brief cold period projected for the end of the week, temperatures are expected to stay above the 30-year average.

Traders have been selling natural-gas futures on the expectation that “the coldest part of winter is behind us,” said Tom Saal, a broker at INTL Hencorp Futures. “Historically, this is the time of season where you have the coldest weather.”

While Kopin is positive on Williams (WMB), the majority owner of its namesake MLP, Williams Partners (WPZ), and Southwestern Energy (SWN), you can also look to the entire sector.

First Trust ISE Revere Natural Gas Index Fund (FCG), holding the stocks of natural gas companies, has done well enough to attract nearly half a billion dollars in investor assets. You don’t have to think about roll costs and other peculiarities of the futures market with this one.

About Focus on Funds

As exchange-traded funds and other investing vehicles have ballooned in number, the task of figuring out what works well and what doesn’t has only gotten harder. Barrons.com’s Focus on Funds looks under the hood of ETFs, mutual funds and hedge funds for overlooked values, actionable ideas and the latest pitfalls for fund investors.

Chris Dieterich has covered the U.S. stock market for The Wall Street Journal and Dow Jones Newswires. He is a graduate of Regis University and the Missouri School of Journalism.